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ILPA: Secondaries IRR mostly healthy in Q4

Secondaries funds generated a pooled net IRR of 2.04 percent during the period.

Global secondaries funds barely out-performed other strategies in terms of net internal rates of return (IRR) in the fourth quarter of 2014, according to data from the Institutional Limited Partners Association released earlier this month.

During that period, secondaries funds generated a pooled net IRR of 2.04 percent, only slightly better than the 2.01 percent average net IRR for all strategies combined including private equity, venture capital, fund of funds, distressed and natural resources funds.

Yet the ILPA All Funds Index, which combines all private market strategies, was boosted by an exceptionally strong return of 9.01 percent from Asia and Pacific private equity and venture capital funds in the fourth quarter.

Source: Cambridge Associates and ILPA Private Markets Benchmark

In addition to Asia and Pacific private equity and venture capital funds, US and Canada venture capital funds and fund of funds also performed better than secondaries in the first quarter. However, secondaries performed better than US and Canada private equity funds, which generated 0.75 percent in the fourth quarter.

Secondaries funds are doing better than they did earlier in 2014. In the first quarter of 2014, secondaries funds under-performed other strategies, generating a pooled net IRR of 1.49 percent, lower than the 3.21 percent average net IRR for all other funds combined.

Over longer time periods, secondaries funds lagged behind most strategies. Secondaries registered a 10-year net IRR of 11.45 percent, lower than the 11.89 percent 10-year net IRR generated by ILPA All Funds Index. However, secondaries funds performed better in the long term than fund of funds, which generated 9.74 percent 10-year net IRR.

The ILPA data is based on returns for 3,164 funds as of 31 December 2014.